In the nearly three years since Robert Forney took over as chief executive, the Chicago Stock Exchange, or CHX, has been the incredible shrinking marketplace.
Its head count has plunged to 175 from 900 as Forney sold off clearing and trust units, gave up a majority stake in an international consulting arm and shut down a stock-trading venture for institutions.
The goal: Shore up the exchange’s finances and refocus on the core business of trading stocks.
To hear Forney tell it, the restructuring has led to boom times. Costs are down, service is improved and membership seat prices have recovered from a worrisome depression, he said.
Trading volume last year spurted 42 percent, to 5.6 billion shares.
Yet even as it lays claim to the title of “biggest” regional exchange, the CHX can’t escape the nagging suspicion that it will never be more than a bit player in the global marketplace. While its trading volume has ticked ahead, it remains a faint shadow of the dominant New York Stock Exchange and Nasdaq markets.
The CHX’s 1997 volume amounted to less than 2 percent of the trading done on the two primary exchanges, and its share has been fading. A decade ago, it traded nearly 4 percent as much as the biggies, and five years ago, it traded 3 percent as much.
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Even some former boosters believe the exchange will be pushed to the margin in years ahead.
As the head of one Chicago brokerage put it, the increased efficiency of the big markets and the success of third-market firms such as Madoff Investment Securities has made the CHX all but “irrelevant.”
Naturally, Forney begs to differ. “You’ll see an increase in our growth,” he vowed. “It will really kick into high gear. We really like our core business.”
Arbit-rage: If the Chicago Stock Exchange has a nemesis, it’s Leon Greenblatt’s Scattered Corp.
After a costly legal dispute, the exchange executive committee a year ago expelled the Chicago-based trading firm from membership and leveled the kind of fine usually reserved for the worst penny-stock scams: $6.8 million.
Accused of violating exchange rules in a 1993 arbitrage of LTV Corp. stock that netted it a $25 million profit, Scattered has appealed to the U.S. Securities and Exchange Commission.
Forney said he expects an SEC ruling within months in support of the exchange’s findings.
Scattered, which has peppered the exchange with lawsuits–and may have more in store for it–believes the SEC will take its side in the case.
So would Greenblatt want his membership back? Unlikely. He’s convinced he’ll outlast the 115-year-old exchange. “I don’t believe they’ll be able to survive,” Greenblatt said. “There’s no room for them.”
Double your pleasure: The Doublemint twins have nothing on the Chicago Mercantile Exchange these days.
In January, the exchange created a post for outgoing Chairman Jack Sandner that had a familiar ring to it: As the board’s $200,000-a-year “special” policy adviser, Sandner would fulfill much the same role as its $200,000-a-year “senior” policy adviser, Leo Melamed.
Now, the exchange has just named an endowed finance professorship at Northwestern University’s J.L. Kellogg Graduate School of Management in Sandner’s honor.
Coincidentally, the exchange in 1991 named an endowed finance professorship at the University of Chicago’s Graduate School of Business in Melamed’s honor.
After that, Melamed went on to write an entertaining autobiography, “Escape to the Futures.” Can a Sandner book be far behind?
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